2-1 The Accounting Equation

What is an asset?

• A debt or obligation owed to another person or organization.

• A tangible or intangible resource that has economic value, owned by a person or organization.

• The financial claims on a company’s assets.

• A financial statement showing a company's financial situation.

Which financial statement shows a company's financial situation at a specific moment in time?

• Income Statement

• Cash Flow Statement

• Balance Sheet

• Net Worth Statement

Who is a creditor?

• The owner of a business.

• The person or organization to whom a debt or obligation is owed.

• A person who owes money to a business.

• An investor in a company.

What are equities in the context of a company's assets?

• The debts owed by a company.

• The financial claims on a company’s assets.

• The tangible assets owned by a company.

• The cash reserves of a company.

What is a liability?

• A resource with economic value owned by a person or organization.

• A debt or obligation owed to any other person or organization.

• The owner’s rights to the assets of a business.

• The total value of a company's assets.

What is a loan?

• A gift of money to an individual or business.

• Money given to an individual or business in exchange for future repayment of the principal amount plus interest.

• A financial statement showing a company's liabilities.

• An investment in a company's stock.

How is net worth calculated?

• The sum of all assets and liabilities.

• The difference between an individual's assets and liabilities.

• The total value of a company's liabilities.

• The total value of a company's assets.

What does a net worth statement show?

• The relationship between an individual's assets, liabilities, and equity.

• The total income of an individual.

• The cash flow of a business.

• The expenses of a company.

What is owners’ equity?

• The debts owed by a company.

• The owner’s rights to the assets of a business after all liabilities have been paid.

• The total value of a company's assets.

• The financial claims on a company’s liabilities.

What is the accounting equation?